David and Goliath: Canadian Grocers versus Walmart

I recently finished reading Malcolm Gladwell’s new novel, ‘David and Goliath’.  Now, this tale is one that many of us heard growing up and likely perceived as a great ‘underdog’ story, but, it wasn’t until Gladwell broke down the fable and described why David was successful in this battle that I realized the true beauty and strategy behind this story.  On the surface, just as most of the onlookers in the battle of David and Goliath believed, David had no chance to win. However, he had one key insight that everyone else did not: he realized Goliath’s strengths of size, thick armor and power were unmatchable when fighting in traditional close combat, but when David changed his strategy and artillery to projectile weapons, Goliath’s perceived strengths became his weaknesses. David was quick, nimble and deadly with a rock and sling.  The points of perceived strengths and weakness, and changing the circumstances to fit your own strengths are essential to strategy development in any situation; even in today’s business world.

Recently, Walmart announced they plan to invest $500m into the Canadian market to enter urban centers and ‘beef-up’ their grocery business.  As most of us know, Walmart is the world’s biggest company by revenues; a Goliath if you will. As a low cost producer trying to gain market share by causing price cutting wars, Walmart stimulates its growth and increases profits by pushing competitors out of this space.  This new investment surely frightens Canadian grocery retailers like Loblaws and Sobeys, as they must figure out how to optimally compete with Walmart in order to survive long-term.

So let’s step back for a second.

When I was finishing up business school, there was a ton of hype around Target entering the Canadian market and how our retailers could not compete with this American juggernaut.  One of Canada’s most iconic Canadian companies, Canadian Tire Corporation, likely had the most to lose.  But if you look at the market today, Canadian Tire is flourishing and Target is still finding their way to master a strategy that will work in Canada.  At a glance, this may not make sense as Target is a mega-power in the United States, however when you dig deeper to understand the competitive landscape and the challenges the truth is revealed in the strategic excellence of Canadian Tire’s strategy shaped by their leadership team.

Just as Canadian Tire realized with the entry of Target into Canada, it is integral for Loblaws and Sobeys to develop a strong strategy to compete (and win).  Both Sobeys and Loblaws know Walmart will likely have an advantage in pricing, and therefore should work to enhance their operational efficiency, building service and quality capacity, as well finding purposeful opportunities to resonate with Canadians to gain their loyalty and sustained business.

Strategic marketing and sponsorship provides an exceptional opportunity for brands to generate passion, loyalty and ritual with their audience by making an authentic connection with the consumer psyche.  Just as Canadian Tire did with its investment in sport in Canada – tied together with the message that “We All Play for Canada”, Canadian grocers would be well-served to build partnerships and create opportunities in alignment with their corporate strategies and objectives – and in particular, hone in on opportunities to ‘own’ a thread in the fabric of Canadian culture.

With Walmart investing heavily into its grocery business in Canada, our Canadian grocers must write their own David and Goliath stories in the marketplace by optimizing their business, focusing on their core strengths and understanding how they must ‘change the game’ to resonate in the Canadian consumer’s mindset.